Written by Andreas Jones, Financial Coach
Andreas Jones is well-known when it comes to Personal Finance and Frugal Lifestyle. He is the founder of KindaFrugal.com, an online blog and learning platform, the author of the book Financial Dignity, published in 2025, and the owner of the Well and Wealthy newsletter.
Your 20s can feel overwhelming when it comes to money. Between student loans, career moves, and trying to build savings, there's a lot to figure out. I've noticed a growing trend where many young adults move back home temporarily while getting their finances in order. This choice, while sometimes challenging emotionally, can provide a valuable opportunity to build financial stability.
The most important financial moves to make in your 20s are building an emergency fund, starting retirement savings, and avoiding high-interest debt. These fundamentals create a strong foundation for your future wealth. I've seen how starting early with these basics can make a huge difference down the road. Even small, consistent steps toward these goals can add up to significant progress over time.
I know it's tempting to put off money management when entering adulthood brings so many changes. The transition from student life to full-time work, possibly moving to a new city, and navigating new relationships and social circles can feel overwhelming. But making smart choices with your money now will give you more freedom and security in the decades ahead.
Creating a realistic budget
I recommend tracking every dollar you spend for 30 days to understand your actual spending patterns. This exercise often reveals surprising patterns and helps identify areas where you can cut back without feeling deprived. Split your take-home pay into three main categories: 50% for needs (rent, utilities, groceries), 30% for wants (entertainment, dining out), and 20% for savings and debt payments.
Use a personal financial planning spreadsheet or budgeting app to monitor your spending. Many free tools make this process simple and even enjoyable.
Key budget categories
Housing costs (rent/mortgage)
Transportation (car payments, gas, maintenance, public transit)
Food and groceries (including dining out)
Utilities (electricity, water, internet, phone)
Insurance (health, car, renters/homeowners)
Emergency fund contributions (aim for 3-6 months of expenses)
Understanding credit principles
Your credit score affects your ability to rent an apartment, get a car loan, or qualify for better interest rates. I suggest checking your credit report every four months through annualcreditreport.com. This regular monitoring helps catch errors early and tracks your progress.
Pay all bills on time – this makes up 35% of your credit score. Keep credit card utilization below 30% of your available credit limit. For example, if you have a $1,000 credit limit, try to keep your balance under $300.
Credit score factors
Payment history (35%): Consistently paying bills on time
Credit utilization (30%): How much of your available credit you're using
Length of credit history (15%): How long you've had credit accounts
Credit mix (10%): Different types of credit accounts
New credit (10%): Recently opened accounts
Debt management strategies
Start by making a detailed list of all your debts and their interest rates. I've found that tackling high-interest debt first while keeping up with minimum payments on other accounts is the most effective approach. The debt snowball method has worked wonders for me – paying off smaller debts first creates a powerful sense of accomplishment and momentum that keeps you motivated.
For those grappling with student loans, look into income-driven repayment plans that can make monthly payments more manageable. If your credit score has improved since taking out your loans, consider refinancing to secure a lower interest rate. I recently helped a friend refinance their 6.8% federal loan to a 4.2% private loan, saving them thousands over the loan term.
Related article: 3 Steps to Mind The Gap And Unleash the Power Of Your Money
Smart debt moves
Build a solid emergency fund before aggressively tackling debt – this prevents taking on new debt when unexpected expenses arise
Stay current on all minimum payments to protect your credit score
Put a freeze on new credit while paying down existing balances
Look into 0% APR balance transfer cards for high-interest credit card debt, but read the fine print carefully
Related article: 3 Steps to Mind The Gap And Unleash the Power Of Your Money
Building and protecting your financial wealth
The financial choices you make in your 20s lay the groundwork for long-term financial success. Building real wealth requires three key elements: consistent saving habits, smart investment choices, and protecting what you've built from life's curveballs.
Saving for an emergency fund
I strongly suggest keeping 3-6 months of living expenses in an easily accessible account. High-yield savings accounts are perfect for emergency funds – they offer better interest rates than traditional savings accounts while maintaining quick access to your money when needed.
Setting up automatic transfers from each paycheck makes saving almost effortless. I personally save 15% of my income and increase this percentage whenever I get a raise.
Emergency funds provide crucial protection against
Unexpected job loss or reduced income
Surprise medical bills and health emergencies
Essential car repairs and maintenance
Critical home repairs and replacements
Last-minute travel for family emergencies
Investing in your future
Starting to invest early lets you harness the incredible power of compound interest. Time in the market is your greatest ally when building long-term wealth.
Key investment accounts to consider
Company 401(k) with employer match – this is essentially free money
Roth IRA for tax-free growth potential
Low-cost index funds for broad market exposure
Target date funds that automatically adjust risk over time
I make it a point to invest in any raises or bonuses rather than increasing my spending. Extra income from side projects goes straight into investments, helping accelerate my wealth-building goals.
Securing adequate insurance
The right insurance protects the wealth you're building. Essential coverage in your 20s includes:
Health insurance
Comprehensive medical coverage
Dental insurance for preventive care
Vision insurance if needed
Property protection
Renters or homeowners insurance
Auto insurance with appropriate coverage levels
Personal liability protection
I review my insurance policies annually to ensure they still provide adequate coverage as my assets grow. Having proper insurance now prevents devastating financial setbacks later.
Read more from Andreas Jones
Andreas Jones, Financial Coach
Andreas Jones is well-known when it comes to Personal Finance and Frugal Lifestyle. After struggling with debt and financial shame, Andreas created strategies to dramatically improve his financial well-being. He has since dedicated his life to helping others achieve financial independence while enjoying life today. He is the founder of KindaFrugal.com, the premiere blog and digital learning academy with students in 195 countries. His mission: everyone experiences Financial Dignity.
